By The AR Agent team · · 6 min read
A remittance advice is a note a customer sends to a supplier to say what a payment covers. It lists the invoices being paid, the amount applied to each, and any deductions, so the supplier can match the money in the bank to the right invoices.
It is not a bill, and usually not a legal requirement. But it is often the only reliable way to tell which invoices a payment was meant to settle.
"Remittance" means money sent. A remittance advice is the explanation that goes with it.
Say a supplier has five open invoices with one customer. A single payment of $11,750 arrives. Without a remittance advice, the supplier has to work out which invoices add up to $11,750, and whether the gap between that and the $14,200 total is a short payment, a dispute, or an invoice the customer has not approved yet. With a remittance advice, the customer has already said.
Remittance advice can arrive in a few forms:
There is no fixed format. A useful one includes:
If you only get the total and the date, you have a payment notification, not a remittance advice. It is better than nothing, but it still leaves you guessing.
These three documents are easy to confuse because they all refer to the same sale.
| Document | Who sends it | When | What it does |
|---|---|---|---|
| Invoice | Supplier | After the work or delivery | Asks for payment of a stated amount by a stated date |
| Remittance advice | Customer | When they pay | Says which invoices the payment covers and how it was split |
| Receipt | Supplier | After the money arrives | Confirms the payment was received |
The invoice starts the cycle. The remittance advice explains the payment. The receipt closes it. In business-to-business work, many suppliers never send formal receipts, but they still rely on remittance advice to record payments correctly. A statement of account is a fourth document: the supplier's summary of everything still open.
Apply a payment to the wrong invoice and the one actually paid stays open on your accounts receivable aging report. Your next reminder then asks the customer for money they have already sent.
A short payment is when the customer pays less than the invoice total. Sometimes it is deliberate: they are holding back a disputed line, taking a discount, or deducting a credit they believe they are owed. Sometimes it is a mistake. A remittance advice usually says which, so you can deal with it while it is fresh. Our guide to partial payments covers how to handle the balance.
Most customers send one if asked. The best time to ask is when you set up the account, not after a confusing payment arrives.
Subject: Remittance details for your payment of [Amount] on [Payment date]
Hi [First name],
Thank you for your payment of [Amount], received on [Payment date].
So we can apply it correctly, could you send the remittance advice,
or simply reply with the invoice numbers it covers and the amount
for each?
Our records show these invoices open on your account:
[Invoice number] - [Amount] - due [Due date]
[Invoice number] - [Amount] - due [Due date]
If any amount was held back or deducted, please let us know which
invoice and why, so we can look into it.
For future payments, remittance advice can go to [Remittance email].
Thanks,
[Your name]
[Company name]
If the reply shows a deduction you did not expect, treat it as a possible invoice dispute and resolve it before chasing the remaining balance.
No. A remittance advice comes from the customer and explains what a payment covers. A receipt comes from the supplier and confirms the money arrived. One is sent by the payer and the other by the payee, at different points in the cycle. In business-to-business work, the remittance advice is usually the more useful of the two for keeping your records straight.
Generally, no. It is a business practice, not a legal requirement, though some contracts and supplier agreements ask for one. If a customer does not send remittance details, ask politely when you set up the account, and again whenever a payment arrives that you cannot match with confidence.
Do not guess. Check whether the amount matches one invoice or an obvious group of invoices. If it does not, hold it unapplied or apply it provisionally, and email the customer for the breakdown. Guessing wrong leaves a paid invoice open and leads to reminders for money already sent.
Read the reason. A deduction may be an agreed discount, a credit memo the customer has applied, or a disputed amount they are holding back. Confirm it in writing. If you agree, issue a credit memo to clear it. If you do not, raise it now, while the details are fresh.
Yes. Some payers attach invoice details to an electronic payment so they show up in the supplier's bank records. Whether you can see them depends on your bank and the payment format. If you cannot find them, ask your bank or ask the customer to email the details instead.
The AR Agent reads what customers write back when it follows up on overdue invoices by email. It works from the invoices in your QuickBooks or Xero. If a reply says a payment is on its way, it records that as a tracked payment promise and follows up if the date passes. If a customer says an amount was held back because of a query on an invoice, that is a blocker, and normal chasing pauses so the right person can look at it. When a reply needs a judgement, such as whether to accept a deduction, it asks your team. Every reply and action stays on the customer's record.
Talk to us: our AI agent chases your invoices until you are paid.
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